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How Can an Illinois Divorce Affect My Taxes?
Divorce can change your taxes in several ways, from your filing status to the tax implications of property division. Some changes take effect in the year your divorce is finalized. Others, such as the tax on property you receive, may not show up until years later when you sell it.
Illinois courts can consider tax consequences when they divide property and set maintenance. Knowing how these rules work can help you judge whether a proposed settlement is fair to you.
If you’re going through a divorce in 2026, a St. Charles, IL divorce attorney can help you understand how each part of your settlement may affect your taxes.
How Does Your Filing Status Change During an Illinois Divorce?
The IRS looks at your marital status as of December 31 to set your filing status for the whole year. If your divorce is final by then, you can’t file as married for any part of the year. If it isn’t final, you’re still considered married for tax purposes unless you have a final decree of legal separation or separate maintenance. Simply moving out doesn't change your marital status for tax purposes.
Depending on where your divorce stands at the end of the year, your options may include:
- Married filing jointly (if both spouses agree)
- Married filing separately
- Single (if the divorce was final by December 31)
- Head of household, if you’re unmarried or considered unmarried and paid more than half the cost of keeping a home for a qualifying child
A joint return usually means a lower combined tax bill. It also makes each spouse responsible for the full tax owed on the return, including any errors the other spouse made.
If you don’t trust your spouse’s reporting, filing separately may be safer even if it costs more.
Is Spousal Maintenance Taxable in Illinois?
Maintenance ordered in a divorce finalized after December 31, 2018, isn’t deductible for the paying spouse. The spouse receiving it also doesn’t report it as income.
Orders entered before 2019 keep the old tax treatment, where the paying spouse can deduct payments, and the recipient pays the tax. Under 750 ILCS 5/504(b-4), a pre-2019 order that’s later modified keeps its original tax treatment. The only exception is if both spouses expressly agree otherwise in the modification order.
Is Child Support Taxable in Illinois?
Child support isn’t taxable to the parent who receives it, and the parent who pays it can’t deduct it. The main question regarding taxes and children is which parent claims the children.
The IRS lets the custodial parent claim a child as a dependent. This is the parent the child lives with for more nights during the year. The custodial parent can release the claim to the other parent by signing IRS Form 8332. Many divorce agreements spell out which parent claims each child in which years.
Releasing the claim doesn’t reallocate every tax benefit. The other parent may claim the child tax credit, but head of household status and the credit for child care expenses generally stay with the custodial parent.
How Can Dividing Property in an Illinois Divorce Affect Your Taxes?
Transferring property between spouses as part of the divorce itself isn’t a taxable event. However, the spouse who receives an asset also takes on its original cost basis. "Cost basis" is what’s used to calculate the monetary gain when it’s sold, and this amount can have tax implications.
The following are assets that commonly come with tax implications after a divorce.
The Family Home
When you sell your main home, you may exclude up to $250,000 of profit from tax, or $500,000 on a joint return. You usually have to have owned and lived in the home for two of the last five years. If your ex-spouse lives in the home under your divorce decree, that time may count toward your use of the home.
Retirement Accounts
A 401(k) or pension is usually divided through a qualified domestic relations order (QDRO). A payment to a former spouse under a QDRO isn’t subject to the 10 percent early-withdrawal penalty, but it may still be subject to income tax. An eligible distribution can be rolled into an IRA or another qualifying retirement plan without triggering immediate taxes.
IRAs are divided by a transfer under the divorce decree instead, and the penalty exception doesn’t apply to them.
Investment Accounts
The proceeds from selling stocks can be taxed, making two assets with the same value carry very different tax bills.
For example, $100,000 in cash and $100,000 in stock bought for $20,000 look equal on paper. If the stock is sold, though, the owner may owe tax on an $80,000 gain.
What Tax Steps Should You Take After Your Illinois Divorce Is Final?
A few updates after your divorce can help you avoid problems come tax time. Your filing status may change, so you may need to give your employer a new Form W-4. Otherwise, too little tax may be withheld from your paychecks.
If you changed your name, update it with the Social Security Administration before you file. The name on your return has to match its records. If you moved, you can file IRS Form 8822 to update your address.
To be confident that you haven’t overlooked any assets that will come back as substantial tax payments, or if you aren’t sure what the most advantageous way to file for the year is, speak to a qualified lawyer about your situation.
Call a Kane County, IL Divorce Attorney Today
Our main attorney is a trained mediator with significant family law experience. We focus on resolving divorce issues through mediation when possible, which can give you more control over how assets and tax benefits are divided. When a case requires it, though, we’re prepared to litigate aggressively in court.
Tax rules are complex, so it may also help to speak with a tax professional about your specific numbers. Our St. Charles, IL divorce lawyers can work with your tax advisor to help build a settlement that accounts for what you’ll owe.
Call Shaw Sanders, P.C. at 630-584-5550 today to schedule your free consultation.
630-584-5550